Debt consolidation and becoming debt free in a year

Ads to get out of debt in a year seem terrific - the companies purport to have an office full of specialists with years of past experience who can help you with your financial troubles. They'll tell you how they can get your creditors to agree to accept less money than you owe them - perhaps as little as one half of your outstanding debt. A number of agencies offer to help people become debt-free in a mere one year. You have likely seen ads for companies that pledge to get people out of debt problems quickly.

Becoming debt-free in a year's time would be impressive, wouldn't it? Just pay a small monthly payment and your amount of debt will be cut in half! Becoming financially independent by chopping your what you owe in half does sound smart, until you take a minute to ponder "Why would my lenders or creditors be willing to accept less money than what I owe?" The debt elimination plans are not particularly designed to help you become financially independent. Debt elimination companies seek only to take your money.

How do these debt elimination companies work? To speedily get rid of your debts, a number of steps are involved. The financial professional will instruct you to send a monthly check to them to cover your monthly debts. The company might or might not deduct your monthly fee to them from the total amount you pay them every month for your debts. A few customers may believe that these organizations will negotiate your financial obligations with your creditors and pay them from the cash you send them.  In all likelihood, they will just do nothing at all, and perhaps for quite a long period of time. The agency will request payment; fees will likely include an one time application fee and there will likely be ongoing monthly fees, also. You make an appointment with with the agency and agree to pay some fees up front.
 

There is a downside to doing business with debt elimination agencies. If you haven't been paying your bills, it is going to ruin your credit report. Credit card companies don't like being unpaid. Money owed that is waived by your lenders will be regarded by the IRS as income that may be taxed, so you'll be responsible for taxes on the debts you did not repay. If you do not pay your bills for any reason, you're going to be listed as a deadbeat to the credit bureaus. Transacting with one of these advertisers may reduce your debt problems a bit, but you'll find it nearly impossible to obtain credit again anytime soon. Debt elimination appears like a great idea until you come to find that your lenders or creditors are not too eager to settle for half of the money you owe. Your debt elimination service is going to tell you to send money to them, rather than your creditors and to pay no attention to any communication from your creditors. After your bills have gone unpaid for a few months, they will then negotiate with your lenders in order to encourage them to lower your debts. If you have been making monthly payments, even if you have only been sending in the required amount, your creditors are content. Credit card issuers make tons of money off of people who pay only the minimum amounts. As long as you are making required monthly payments, your creditors have no reason to negotiate with you.

There are smarter ways to find financial freedom than by contacting businesses that advertise on television.